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Thursday, 3 April 2014

Russia is proceeding with what looks like being the largest network road pricing system in the world, in terms of network distance. That system is to charge all trucks 12 tonnes and over on Federal Highways by weight and distance. I wrote about this in 2012, and Russia is in the midst of a procurement process for the system.

Russian Federal Highway network will have the world's largest road pricing system in place

Kapsch put out a press release in November 2013 that a consortium of two of its companies and Russian company JSC (NIS) had prequalified in the tender process. The winner was meant to have been notified on 17 March 2014, but whether that has happened or whether it remains confidential whilst concession contracts are negotiated is unclear.

The system is meant to cover 50,000 km of Federal Highways and is intended to confront the key issue that much of the network is unable to safely and efficiently handle the growth in traffic, both of trucks and cars, with the consequence that road surfaces and bridges are deteriorating due to the growth in heavy traffic and roads need upgrading to make them safer for traffic which involves many more cars sharing the roads with trucks.

Bear in mind historically the Soviet Union used the railways as the primary means for intercity freight and passenger transport, with roads largely relegated to local access and connections, and for military purposes. Most Russian highways were not built with the purpose of handling lots of private cars, certainly not with cars having to interact with large volumes of trucks.

The Russian Government is progressing with its system (with the acronym SVP) to implement user pays to recover the majority of maintenance costs from trucks, given the impact they impose on the network. An impact study commissioned by the government apparently indicates it will be a 0.5% negative impact on the profitability of the trucking industry, but will create a 10 billion rouble (US$283 million) economic benefit over 16 years from expenditure on improved roads reducing accidents. In short, whilst it will impose a cost on trucking, it is meant to generate net benefits from better roads, primarily by improved safety. I suspect if enforced effectively, this could also see benefits from compliance with weight limits and other laws around safety and infrastructure protection.

Enforcement will be by ANPR cameras to identify vehicles registered with accounts and those that are not in arrears. Microwave profiling technology will be used to identify the size of vehicles, to filter out those not liable for the charge. 500 fixed enforcement sites are to be installed, with 200 mobile enforcement vehicles also to roam the network. I think that will probably prove to be inadequate in more remote areas and certainly in the initial couple of years. A 2% violation rate is the maximum target.

According to Isvestia (Russian), the new system is meant to be in place by November 2014 (official information indicates "financial close" will be December 2014, but it is unclear what that means) with the fee being 3.5 roubles (US$0.10) per km. Expected revenues will be 160 billion roubles per annum (US$4.5 billion). Buses, military and emergency vehicles are exempt, and charges will not be levied on toll roads, given that charges already exist on such roads.

, is responsible for the programme and detection and measurement of distance will be through compulsory on board units, equipped with both GLONASS (the Russian GNSS system) and GPS detectors to measure distance on roads. Installation will mean creation of a prepaid account which will see amounts deducted according to the trips undertaken by the truck.

One article seems to indicate that the On Board Units will be "light" clients, in that they will transmit data about vehicle movements via mobile phone networks to central data processing systems, which will then calculate the applicable charge. This sort of approach has been criticised elsewhere as representing a threat to privacy, but for trucks in Russia, it may be seen as offering security benefits.

Fines for non compliance, whether it be not having a unit installed or being in arrears with an account can range from 5,000 to 1 million roubles (US$141 - US$28,254). The total costs of establishing the system are estimated to be 25 billion roubles (US$706 million) of which 14 billion roubles (US$393 million) are to go on the On Board Units alone. The rest are for stationery enforcement units (gantry based cameras and microwave devices), software development and other capital costs.

64 billion roubles (US$1.8 billion) in operating costs are expected for a concession of 13 years. The concessionaire is to get a fee of around 11 billion roubles per annum based on meeting minimum targets of identifying and collecting revenue from trucks.

From that, it is expected 83 billion roubles (US$2.3 billion) will be available in net revenues in 2015 to be spent on badly needed highway maintenance. I'll blame translation issues for figuring out the gap between 160 billion roubles in gross revenues minus 83 billion in net revenues and 64 billion in operating costs (and even 25 billion in capital costs). If anyone in Russia knows if these figures are accurate or not, I'd appreciate it.

Around 2 million OBUs are apparently going to be needed (for 1.6 million Russian and around 50,000 foreign trucks) indicates a cost per OBU installation of around US$197, which is quite reasonable. The trucking industry indicates that there are ways to avoid the system by interfering with GNSS signals, although it will be dependent on whether enforcement across such a vast country can be done economically and effectively. Of course new OBUs will be needed every year for new trucks as old ones get removed, damaged etc.

This is quite some undertaking, particularly in the timeframe suggested, where anyone who wants to get started would have a serious logistical and technical challenge to have On Board Units ready and installed for collecting tolls from November 2014. It will be interesting to see what consortium is selected for this monumental task.

However, there is something to be said for the programme, as it will, on the face of it, be more efficient and introduce economically efficient based pricing across major Russian highways. It wont be replacing fuel or other taxes, but should make a difference to road freight across Russia, although for it to be fully accepted, evidence of the net revenues being used to upgrade roads will need to be seen within a few years.

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What is road pricing?

Road pricing is any system that directly charges motorists for the use of a road or network of roads. Traditionally it has meant tolls on single routes, particularly crossings such as bridges or tunnels. More recently it also includes area, cordon and zone pricing of urban areas, and distance and time based charging of whole networks. It does not include fuel or tyre taxes, or taxes on ownership or purchase of road vehicles.